Dexia board calls for shareholders to back capital increase

The Dexia tower is seen in La Defense, near Paris, November 8, 2012.John Schults

BRUSSELS (Reuters) - The board of directors of financier Dexia called a shareholders' meeting to approve a capital increase for the orderly resolution of the bank, the group said on Wednesday.

Earlier this month, Belgium and France agreed to pay 5.5 billion euros ($7 billion) to take almost full control of Dexia (DEXI.BR) in the hope this third bailout will be its last.

Once the world's largest municipal lenders, Dexia has become one of the most prominent victims of the financial crisis.

"The orderly resolution plan supported by the capital increase that will be underwritten by Belgium and France subject to shareholder approval has the objective of avoiding any systemic risk that would result from the group's liquidation," said a spokeswoman.

The meeting of shareholders is due to take place on December 21.

"The board of directors of Dexia SA recommends that shareholders rule in favor of a continuation of the activities of Dexia SA and approve the capital increase to which the Belgian and French states undertook to subscribe," the company said in a statement.

The statement said its plan included the disposal of various parts of the business, a state guarantee of up to 85 billion euros alongside the 5.5 billion euro capital increase.

Dexia, which at its peak had business across Europe and a large U.S. presence, had relied on long-term lending serviced with short-term borrowing, which dried up in the financial crisis.

Already stripped of most of its businesses, Dexia now faces a future as a holder of bonds and loans in run-off, with state guarantees to support its funding and prevent a collapse.